FPIs Urge Sebi to Implement Margin Netting and Centralised Documentation Framework

Foreign portfolio investors (FPIs) have called on the Securities and Exchange Board of India (Sebi) to implement margin netting and create a centralised documentation system aimed at simplifying market operations and reducing foreign exchange costs. The recommendations were made during a panel discussion at the Global Fintech Fest, which included Sebi officials and senior representatives from leading financial institutions.

The discussion focused on easing operational challenges for global investors in Indian markets and improving overall transaction efficiency in line with international standards.

FPIs Call for Margin Netting to Reduce Forex Costs

A key request from FPIs was the introduction of margin netting, which would allow investors to offset margin requirements across multiple positions. This, they argued, would help cut down on frequent currency inflows and outflows, thereby reducing forex transaction costs.

“A lot has been done for FPIs, like introducing a common contract note. Now, the next step could be net margin. Can we actually reduce inflow and outflow of currency? Because there is a huge cost,” said Kaku Nakhate, CEO, India, Bank of America.

Currently, FPIs maintain separate margin accounts for each transaction, often leading to inefficiencies and additional banking costs. Market participants believe a net margin approach could bring Indian settlement practices closer to international frameworks while enhancing liquidity management.

Centralised Documentation and Standardisation for Greater Efficiency

FPIs also proposed the establishment of a centralised repository for documentation, which would allow custodians and market intermediaries to store and access investor information securely. This would simplify operational procedures and eliminate redundancies in Know Your Customer (KYC) and compliance processes.

Simon Williams, MD and Asia-Pacific Head of Government Affairs at BlackRock, said that a central repository for FPI documentation would “significantly enhance operational efficiency” by reducing repetitive verification steps and easing investor onboarding.

Sebi’s Response and Ongoing Initiatives

Responding to the proposals, Aparna Thyagarajan, Chief General Manager at Sebi, said the regulator was open to exploring margin netting but emphasised the need to carefully balance risk management with operational efficiency.

She noted that Sebi must assess potential banking risks, price-volume effects, and the overall impact on market stability before implementing such a framework. The equity cash market, which currently follows a T+1 settlement cycle, settles each trade individually, adding complexity to the process and increasing settlement costs.

Sebi has already rolled out several initiatives aimed at simplifying FPI participation. These include the Swagat-FI platform, a single-window system for onboarding FPIs, and simplified registration norms for those investing in Indian government bonds. The regulator is also developing the India Market Access Portal, which will centralise access to regulatory, procedural, and documentation requirements.

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Conclusion

The call from FPIs for margin netting and a centralised documentation repository reflects a broader push toward greater efficiency, transparency, and global alignment in India’s capital markets. While Sebi has welcomed the proposals, it remains cautious about balancing ease of doing business with prudent risk oversight.